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Bear of the Day: Hasbro, Inc. (HAS)

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Hasbro, Inc. ((HAS - Free Report) fell short of both our fourth quarter earnings and revenue estimates on February 13. The toy maker provided dim guidance, extending its streak of downward earnings revisions.

Hasbro’s Quick Story

Hasbro is a toy and game company with a brand portfolio that features Play-Doh, Transformers, Monopoly, the rights to make Star Wars and Marvel toys, and much more, including Magic: The Gathering. Hasbro has been a staple of the industry for years and likely will be going forward.

The Rhode Island-based firm posted back-to-back years of double-digit top line growth in 2020 and 2021, which was always going to be difficult to compete against for the toy maker.

Zacks Investment Research

Image Source: Zacks Investment Research

The company then announced in August that it would sell its eOne film and TV unit to Lionsgate for $500 million.

Hasbro said that the deal, which closed in December 2023, would be used to “retire a minimum of $400 million of floating rate debt by the end of the year, and for other general corporate purposes.” Hasbro acquired eOne in 2019 for $4 billion.

Recent Performance and Outlook

Hasbro is attempting to get back to its core business after its sales fell 9% in 2022 and 15% in 2023. The firm’s recent YoY decline came despite growth in the Wizards of the Coast and Digital Gaming segment (+10%), which was more than "offset by declines in the Consumer Products segment (-19%) and Entertainment segment (-31%)." Meanwhile, its adjusted earnings fell from $4.45 to $2.51 per share in 2023.

Looking ahead, Hasbro’s 2024 sales are projected to slide by 14%. The company’s adjusted earnings are projected to improve by 30% after tumbling in 2023 as it cuts costs where it can.

Still, its adjusted EPS outlook tumbled for both 2024 and 2025 after its mid-February release, extending a rough stretch of downward revisions (see nearby chart).

Zacks Investment Research
Image Source: Zacks Investment Research

Bottom Line

Hasbro’s earnings revisions activity helps it land a Zacks Rank #5 (Strong Sell). Plus, its Toys - Games – Hobbies industry is in the bottom 12% of all Zacks industries. Meanwhile, Hasbro’s dividend payout ratio is reaching sky-high levels.

HAS stock is down around 9% over the last 10 years vs. the S&P 500’s 175% climb. Hasbro shares are currently trading below both their 50-week and 200-week moving averages. Investors might want to stay away from the stock for now or at least until it provides updated guidance next quarter.  

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